3/23/2010 @ 6:00AM

Health Reform's Widespread Impact

In his February 2009 address to a joint session of Congress, President Barack Obama said that he wanted to be “the last” president to push for health care reform and called on lawmakers swiftly to enact reform legislation. However, a failed attempt at bipartisanship, and economic and political vicissitudes, allowed the debate to drag on for more than a year. Problematic aspects of the bill also mean that Congress will be forced to revisit the issue in the medium term. Nevertheless, Monday’s events cemented a new entitlement principle–the notion that government should facilitate access to health insurance for all citizens. Historical experience suggests that once such principles are established, they are exceptionally difficult to alter.

Major implications. Passage of the bill has important implications for the health care industry and politics ahead of November’s mid-term congressional elections:

1. Industry challenges. The legislation traps the insurance industry in a political and financial vice. New regulations and a number of significant fees (affecting insurers, pharmaceutical companies and medical device makers) will eventually force these companies to increase charges and raise premiums. While insurers will get a boost in 2014 when many younger people who lack insurance are forced to purchase it, the costs will exceed these benefits for industry. Hospitals, after agreeing to certain efficiency measures, would not be significantly hurt by the legislation.

2. Political impact. The health care debate engendered a great deal of inaccurate hyperbole. Democrats have played up the benefits of the bill–it will not radically alter the present system as it does relatively little to control costs. Similarly, Republicans have exaggerated its effects: It is not a “government takeover,” and it will not unsettle the roughly 85% of citizens who currently have insurance. In this context, passage of health care reform will affect the three main players–the president, congressional Democrats and congressional Republicans, in different ways:

–Obama. The president is the main beneficiary, having pushed through the most significant statutory overhaul in over 40 years. In the near term, his polling numbers should receive a small boost, as disaffected center-left voters express their satisfaction. Moreover, he does not face the voters until 2012–by then, many may discover that the systemic changes created by the bill are less radical than many had feared.

–Congressional Democrats. Democrats in Congress face a steep political challenge. Enacting the bill required many House members from swing districts to defy strong anti-reform sentiment among their constituents. While these members argue that many individual provisions will be popular once voters understand them, they will have a difficult time selling this to the public before November.

–Congressional Republicans. Republicans gain a major tactical advantage, but they still face strategic challenges. Passage of the legislation enhances their chances this autumn, perhaps to the point where the party can contemplate retaking the House. However, voters may discover that some of their dire predictions about the bill were exaggerated.

Knock-on effects. The extended debate has significantly delayed Obama’s other priorities, killing any chance of meaningful energy reform this year (apart from increased production subsidies, loan guarantees for nuclear power plant construction and a possible alternative energy mandate). Other particularly contentious items, such as immigration reform, are likely to be delayed until the next Congress.

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